Baht concerns abound

[reader]

From Bangkok Post

More than two decades ago, the baht suffered heavy devaluation as a result of speculation, forcing Thailand's central bank to de-link the local currency from the US dollar and adopt a managed floating exchange rate.

Fast-forward to the present and the baht's value has become a challenge for the trade-reliant economy. This time the local currency's strength is the issue, as opposed to drastic depreciation during the 1997 financial crisis.

The last time the baht's value against the greenback touched 29 was in 2013. The currency appreciation irked many businesses and policymakers to the point that there was a public rift between Finance Minister Kittiratt NI a-Ranong and former central bank governor Prasarn Trairatvorakul, as the latter did not acquiesce to the former's demand to cut the policy interest rate to curb the appreciation.

The strong baht in 2019 is a result of Thailand's massive current account surplus. The surplus, worth US$26.4 billion (797 billion baht) on a year-to-date basis as of September, stems from lower import value compared with export value, inflows of tourism revenue and near-record foreign reserves of about $222 billion.

 Ample foreign reserves have made Thailand stand out as a safe haven to park capital, either for actual investment or speculation, amid the US dollar's significant retreat, rattled by the shaky future of the global economy, the Federal Reserve's monetary easing and a tit-for-tat trade dispute between the world's two biggest economies.

The baht is projected to reach 28.70 against the dollar next year on assumptions that exports will start to rebound and the number of inbound tourists will outpace outbound volume.

The local currency is estimated to hover narrowly at 30-30.30 to the dollar for the remainder of this year on anticipation that no trade deal is confirmed between China and the US.

https://www.bangkokpost.com/business/1806469#cxrecs_s

[reader]

From Bangkok Post 

Prayut urges ‘spending in dollars’

Prime Minister Prayut Chan-o-cha said the nation has to think about expenditure in dollars to help weaken its currency.

"We have to think how we will spend in dollars in many ways to help weaken the baht," Gen Prayut said in a speech Monday, adding the private sector needs to help with that process. A current-account surplus, capital inflows and high foreign reserves are among the causes of baht strength, he said.

The comments in Bangkok could be a reiteration of earlier government entreaties for more imports, which require converting baht to spend in dollars, economists said. Calls to a prime minister’s aide for more clarity weren’t immediately answered.

"The premier may be urging people to spend more by converting baht into dollars,” said Kampon Adireksombat, head of economic and financial market research at Siam Commercial Bank. "He wants people to import more and invest more. If we spend more, that will also help reduce our trade surplus."

https://www.bangkokpost.com/business/1807164#cxrecs_s

[Boy69]

I looked at the curve USD to BHT between 2008 to 2019 it is very steady within the limits of 30 to 36 over this period I think the theory of the strength of the BHT is over exaggerated.

I think the main problem is the global fallen of the 'Western curancies ' especially the Euro and the Pound and not the 'strength' of the BHT.

[macaroni21]

Much blame heaped onto the baht for the poor tourism numbers. Reader has posted (https://www.gayguides.com/forums/topic/12701-not-enough-tourists-for-koh-samui/?tab=comments#comment-140091) a Bangkok Post story about Koh Samui's occupancy rate of 30% in fourth quarter 2019. Making the situation worse, another 1,000 rooms are to be added to Koh Samui in 2020, the story says.

Now we have a story about effects on Phuket (https://www.bangkokpost.com/business/1815729/soaring-baht-deals-blow-to-phuket-tourism) saying that "Despite a 4% rise in visitor numbers this year, revenue from tourism is falling,"

A further paragraph says this, conflating two distinct trends: "He blamed the stronger baht for putting a brake on tourism spending, adding that digital disruption had funnelled tourist services and income towards online platforms controlled by outsiders."

An earlier story (https://www.bangkokpost.com/business/1813294/tourism-ministry-to-seek-cabinet-nod-for-new-stimulus-deal) from December 11 says the Tourism Ministry is seeking cabinet approval for a "new tourism stimulus package including multiple-entry visas for Chinese tourists, reduced landing fees for airlines and increased airport slot times."

The latter idea doesn't make a lot of sense. Swampy and Don Muang are already bursting at the seams -- how are they going to increase the number of slots?

The tourist arrival numbers don't seem that bad to me. "This year, Mr Phiphat expects the number of tourist arrivals to reach 40.2 million, outpacing the goal of 39.8 million, but tourism revenue may fall short of the target of 2.04 trillion baht because of the global economic slowdown and solid baht."

The article has some interesting numbers re Chinese tourists which, I recall, has been discussed recently with much heat. Out of 32.5 million tourist arrivals for the first ten months of 2019, Chinese tourists made up about 29%, or 9.34 million.

"Chinese arrivals in the first 10 months stood at 9.34 million, up 3.6% year-on-year, generating 467 billion baht in tourism income, up 5.5%. The number of Chinese tourists this year should reach the target of 11 million, generating 730 billion baht, Mr Chattan said. The agency is confident that Thailand will receive 12 million Chinese arrivals next year, regardless of baht appreciation, which affects tourist spending."

And, in contrast to the stereotype of cheap charlies being bussed around,

"Mr Chattan said independent tourists contribute some 60% of Chinese visitors, while the balance are those travelling in groups."

Look around Lucky Boys, Dream Boys, Jupiter or Moonlight, and you'll see plenty of these independent tourists. Without them, the bars might have closed down long ago.

 

[vinapu]

all trouble started when Moonlight models started asking for 5000 tips and their customers obliged , thus increasing tourist spending in Thailand which in turn led to strengthening baht.

Cheap charlies complaining that some, including me ,  are paying inflated tips can feel vindicated as it's clearly a case of us sawing off branch we are sitting on.

At least this is how I see source of today's troubles with strong baht, guilty as charged.

[TotallyOz]

21 minutes ago, vinapu said:

all trouble started when Moonlight models started asking for 5000 tips and their customers obliged , thus increasing tourist spending in Thailand which in turn led to strengthening baht.

Cheap charlies complaining that some, including me ,  are paying inflated tips can feel vindicated as it's clearly a case of us sawing off branch we are sitting on.

At least this is how I see source of today's troubles with strong baht, guilty as charged.

The most eloquent and insightful rationale yet. Thank you for enlightening us!

[Guest]

On 12/3/2019 at 1:11 PM, Boy69 said:

I looked at the curve USD to BHT between 2008 to 2019 it is very steady within the limits of 30 to 36 over this period I think the theory of the strength of the BHT is over exaggerated.

I think the main problem is the global fallen of the 'Western curancies ' especially the Euro and the Pound and not the 'strength' of the BHT.

This may well be right.

If we look at a couple of "solvent" and successful capitalist economies,  the Swiss Franc has gone from buying approx 32 baht to 31 baht in 10 years,

The Singapore dollar has gone from approx 24 baht to 22 baht. 

I can't imagine either has sent tourists running for the hills.   The Swiss still congregate in the Grottino and can buy their 50 baht coffees.  With frugality like that and a super competitive economy at home , they are unlikely to be priced out of Thailand.